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Lean Six Sigma Water Main Replacement Cost Reduction Greg Meszaros, Director of Public Works and City Utilities.

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Presentation on theme: "Lean Six Sigma Water Main Replacement Cost Reduction Greg Meszaros, Director of Public Works and City Utilities."— Presentation transcript:

1 Lean Six Sigma Water Main Replacement Cost Reduction Greg Meszaros, Director of Public Works and City Utilities

2 Define Phase

3 Problem Statement: Objective: Water main replacement costs are higher than last rate plan estimate Decrease water main replacement construction bid costs from $60/ft to $50/ft Project Description

4 Time Line DefineFeb 2002 MeasureMar 2002 AnalyzeApr 2002 ImproveMay 2002 Control May - Dec 2002

5 Champion: Ted Rhinehart Black Belt: Greg Meszaros Team Members:Matthew Wirtz Mark Gensic Paul Powers Dan Smith Ken Stempien Bob Hinga Outside Members: Contractors, Engineering Firm Project Team

6 Y= Water main replacement construction bid cost per foot Big Y Every $1/ft reduction = $32K per year in savings

7 External (Customer) Focused –Decrease in Service Interruptions –Improved Water Quality –Improved Fire Protection –Improved Control of Utility Rates –Provided customers with a reliable, sufficient water distribution system –Replaced 6 miles of water main per year (150/year replacement cycle) Benefits

8 Measurement Phase

9 Inputs and Outputs 50,000 ft. Water Main Design Process Map Inputs and Outputs

10 Inputs and Outputs


12 Cause and Effect Matrix

13 Time of Year Project is Bid Construction Method Specified Size of Project (Footage of main replaced) Wage Rates Mixture of Work Quality of Underground Facility Data Engineering Firm Cause and Effect Expert Opinion

14 Failure Mode Effect Analysis (FMEA)

15 FMEA & Process Hardening Wage Rates –Require review of all engineers estimates between $150K and $200K before requesting prevailing wage rates –Applies to all construction bidding, not just main replacement work Construction Method –Allow ductile iron (open trench construction) or HDPE (bored construction) option on all main replacement work FMEA and Process Hardening

16 Colony Drive - Estimate: $192,685 *Requested prevailing (higher) wage rates because initial estimate > $150K Actual Bids –$109,785 –$118,622 –$149,200 –$159,388 –$175,272 –$183,029 FMEA-Wage Rate Example *Three bids under $150K Prevailing wage rate structure is not required for this work.

17 MSA Study-Verification Construction bid tabulations were verified with original bid documents from Board of Works records.

18 Analyze & Improve Phases

19 Normal Distribution, Mean=$61.01/ft; StDev=11.05 Distribution

20 Control Chart-In Control

21 Cpk = 0.49 with LSL=$1.00/ft and USL=$75/ft Initial Capability Study

22 Time of Year (Season)Project Size Mixture of Work Interesting Box Plots

23 ANOVA Work

24 Time of Year (Season) Interesting Interaction Size & Season

25 Interesting Interactions Size & Mixture of Work

26 Improvement Conclusion Large (footage>3000 feet), stand alone main replacement work bid in the cold weather

27 Do not request prevailing wage rates until cost estimates exceed $200K Bid all projects with construction method choice (open cut or bored) and award on lowest cost solution Bid larger (total footage) main replacement projects by replacing all under performing water main in an entire neighborhood (as opposed to individual streets) Bid the larger neighborhood replacement projects in the cold weather months (December - March) Bid the larger neighborhood replacement projects with a minimal amount of additional construction work not directly associated with the water main replacement work (dont add lots of surface paving work into the replacement project) Process Change Summary

28 Control Phase

29 Control Plan


31 Process Step: Bid Preparation –Input: Construction Method –Output: Final Bid Packet Process Spec: Allow for two construction methods (open cut or bored) on all main replacement projects and select based on lowest cost Control Method: Review bid tabulation sheet to verify that base (open cut) and alternate (bored) methods are specified for each bid Control Plan- Close Up Example

32 Process Improvement Results

33 Normal Distribution, Mean=$49.92/ft; StDev=4.95 Project Bid After Improvements

34 Control Chart - Before & After Improvements Control Chart

35 Cpk = 1.28 with LSL=$1.00/ft and USL=$75/ft Final Capability-Bids After Improvements

36 Financial Results

37 Direct Savings –Before: $2,824,861/46,498 feet = $60.75/ft –After: $1,325,283/27,041 feet = $49.01/ft –Marginal Difference: $60.75-$49.01 = $11.74/ft –Savings: $11.74*27,041 = $317,461 Indirect Savings –Savings do not include spill over benefit of process hardening activities such as wage rate optimization on other types of project bidding Costs Savings

38 MeasureAnalyzeImproveControl Project Description Process Map C & E Matrix Preliminary FMEA MSA Initial Capability Study Multi-Vari DOE (or other improvement) Control Plan Hand Off Training Final Capability Study Owner Sign-Off Final Project Report Project Tracking

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